Managerial Finance Assignment Report

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Managerial finance

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Table of Contents
Introduction................................................................................................................................3
Ratio analysis.............................................................................................................................3
Sales growth analysis.................................................................................................................6
Cash flow analysis......................................................................................................................7
Risk analysis...............................................................................................................................8
Recommendations......................................................................................................................9
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction
Performance analysis is an important concept which is required to be carried for all the
company. With the help of this, the actions which are taken by the company and their results
are evaluated appropriately. This is done with the help of various tools and techniques which
are available. In the given report the analysis will be made for Daimler Company and in that,
all of the aspects in relation to the same will be taken into account. For the proper evaluation,
the comparison will be made with the previous year. In this, the competitors in the market
will also be considered and the calculation and evaluation for them will also be made. With
the help of this, there will be a comparison of all and the performance which is made by them
will be compared to identify the best company. With that other trends will also be considered
such the growth in sales. All of this will be understood appropriately with the discussion and
calculations which will be made in the report below.
Ratio analysis
The ratio is the best technique that can be used for the proper evaluation of the progress
which is made by the company. In this, there is the consideration of various areas which are
involved such as profitability, liquidity and leverage (Kabajeh, Al Nuaimat and Dahmash,
2012). They are the important aspects which shall be considered so that all of the important
information can be analyzed. In this there will be a collection of the information and various
elements will be used for the calculation of ratios. There are various formulas that will be
used for the same and they with the required calculations are shown below.
Profitability ratios:
In the business, it is required that profits shall be made in an adequate manner and for that
various aspects are required to be considered. The profit of the business is calculated by
reducing all the expenses from the revenue which is made and this is to be noted to identify
the reason for the deviations which are made (Niresh, 2012). In these various ratios will be
calculated and they are represented hereunder:
Profitability
ratios
Particulars Formula Daimler AG Volvo group BMW
2017 2018 2017 2018 2017 2018
Return on Net profit/total 16.29 11.48 19.28 20.16 16.00 12.41

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equity equity*100 % % % % % %
Net profit
margin
Net profit/sales*100 6.47% 4.53% 6.25% 6.49% 8.83% 7.39%
Gross profit
margin
Gross profit/sales*100 21.03
%
19.76
%
23.90
%
22.35
%
20.30
%
19.04
%
The calculation is made in relation to Daimler and its competitors Volvo group and BMW.
The return on equity is calculated and in that it can be noted that the same is decreasing for
Daimler and BMW but the increase is made in the Volvo group. This is because the profits
for Volvo are increasing in 2018 but for the other two companies, there is a decline in the net
profits which are made.
The gross profit margin is calculated and the same is declining in all the cases. It is due to the
increase in sales and a decline in gross profit (Al Nimer, Warrad and Al Omari, 2015). The
net profit margin is also changing and that is declining in the Daimler and BMW. All the
elements in this are considered and by this, it can be said that the profitability of Daimler and
BMW is weak in comparison to the Volvo group. There is a need to make improvements in
the same.
Liquidity ratios:
The business involves various liabilities that are required to be met and for that, it is needed
that there shall be proper liquidity which is maintained. This is to be evaluated and in this, the
assets which are available will be compared with the liabilities to be met in the coming
period. In this, the current ratio will be calculated and in that current assets and current
liabilities will be taken into account (Kirkham, 2012). The quick ratio will also be considered
and in that quick assets will be used in place of current assets and in that the assets which can
be easily converted in liquid form will be considered. The calculations for the same are made
and shown below.
Liquidity
ratios
Particulars Formula Daimler
AG
Volvo
group
BMW
2017 2018 2017 2018 201
7
201
8
Current ratio Current assets/current
liabilities
1.22 1.24 1.16 1.30 1.02 1.18
Quick ratio Quick assets/current liabilities 0.93 0.94 0.85 0.94 0.85 0.99

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The liquidity ratios have been calculated and in that the results for all the companies have
been determined. It can be seen that the current ratio is increasing in all the cases and the
ratio is increasing from 1.22 to 1.24 for Daimler and for the Volvo group it is increasing from
1.16 to 1.30. The BMW Group is also a competitor and in that there is an increase from 1.02
to 1.18. It can be noted the highest rise is in the case of the Volvo group but then also the
ratio is lower than the standard for all the cases (Chiaramonte and Casu, 2017). The quick
ratio is also rising and in that case, the most rises are for BMW and it is very near to the
standard ratios which have been set. The assets are enough for the meeting of liabilities and
so the liquidity is maintained and is improving and will be further improved in the coming
period.
Leverage ratios:
A company requires funds for the undertaking and management of all the activities and due
to that funds are to be collected. There are various sources that are available and it is
necessary to maintain proper balance among them. The main sources include debts and equity
and with that various obligations are also affected. This shows the leverage position of the
business and it is required to be analyzed with the help of available ratios. The asset and
liabilities or debt and equity are taken into account for the same (Molnár and Nyborg, 2013).
There should not be many debts as by that interest expense is raised which affects other
aspects of the business such as profitability. In case of excessive issue of shares also there is a
risk which is involved as the ownership of the company is affected. There is the need to
maintain the control for the same and the calculations are made which are as provided below.
Leverage ratio
Particulars Formula Daimler
AG
Volvo
group
BMW
2017 2018 2017 2018 201
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201
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Debt ratio Total liabilities/total assets 0.74 0.77 0.74 0.73 0.72 0.72
Debt to equity
ratio
Total liabilities/total
equity
2.92 3.26 2.89 2.77 2.61 2.60
The debt ratio shows the proportion of total liabilities which are involved in comparison to
total assets. It can be seen that there is an increase for Daimler which is not good but then
also the maximum limit is maintained (Jarrow, 2013). The position is stable in the case of

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BMW but there is a slight decline in the Volvo group. The debt to equity ratios shows the
relationship between the liabilities and the equity balance which is maintained in the
company. It can be noted that there is a high level of debt that is maintained in comparison to
equity. This is increasing rapidly in Daimler which is not beneficial for the business and will
be increasing the interest liability of the company that will affect the leverage as well as the
liquidity position (Ramalho and da Silva, 2013). Overall it can be said that there is a need for
improvement and by that, the company will attain higher performance and position.
Sales growth analysis
In the business sales is the main activity which is performed and by that there are profits
which are earned. For this, it is required that there shall be increased in the same as then only
the profitability will be raised in the best possible manner. The proper evaluation of the same
is required to be made and for that, the data will be collected (Muhammad, Hussin and
Razak, 2012). On the basis of the collected information, the graph is prepared which is shown
below for better understanding.
2017 2018
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
Sales growth
Daimler AG
Linear (Daimler AG)
Volvo group
Linear (Volvo group)
BMW
Linear (BMW)
In the graph, the sales which are made by the three companies in 2017 and 2018 are shown
and with that, the trend is also recognized. The sales for Daimler are rising slightly from
$164154 in 2017 to $167362 in 2018 (Daimler, 2018). This is a very less increase which is
made by the company and it will be needed that there shall be an improvement which is to be
made and more focus shall be made on the increase in sales by which the benefits will also be
rising (Stancu et al., 2015). For the Volvo group, there is an increase that is involved and it is
higher than Daimler. The sales value was $332738 in 2017 but in 2018 it has raised and

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reached $390834 (Volvo group, 2018). This shows the company is managing its operations in
an effective manner and by that the sales are raising which will be affecting the profits and
other aspects of the company in a positive manner.
In the case of BMW, the sales of the company are declining which is again an adverse
position as the sales were for $98282 in 2017 and is $97480 in 2018 (BMW group, 2018).
This shows that the financial performance of the company is reducing and there is the need to
take strong actions to make the sale grow in the coming years as there will be a positive
impact of the same on the overall position and performance.
The complete analysis is made and in that it is noted that only Volvo is making the increase
in the sales which is made but the others are not in a positive position and that has an adverse
impact. The growth of Daimler is very less and it will have to increase the sales to compete in
the market and by that advantage over others can be gained in the most effective and efficient
manner.
Cash flow analysis
Cash position in the business is to be maintained in an adequate manner as by that other
operation are affected. For the identification of the same, there is the preparation of cash flow
statement which is divided into three parts that involve cash flow from operating, investing
and financing activities (Williams and Dobelman, 2017). It is required that there shall be a
proper balance which shall be maintained as cash and in that all of the areas play an
important role. For Daimler, there is an increase in the net cash flow from $12072 in 2017 to
$15853 in 2018. This increase is made as the negative balance of cash flow from operating in
2017 is converted to a positive balance in 2018. The cash flow from investing activities is
negative and is continuing in that manner only. The financing activities have undergone
changes and by that rise from $13129 to $13226. The overall cash position is positive as there
is a rise that is made and identified and that will be used by the company. However, the
amount which is maintained is quite low and it is needed that there shall be a focus on the
maintenance of the cash balance in the company which is the most liquid asset for any
business and helps in maintaining the liquidity position.
For the Volvo group, there is a strong cash position that is maintained and an increase of
$10841 is made in 2018. There is a positive cash flow that is involved and in that the year-
end balance is at $46933 which is quite good (Volvo group, 2018). There is a decline in the

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cash flow from operating activities and the same is because of the change in the working
capital. There are various modifications that are involved that are the result of the same. The
cash flow from investing activities has also reduced as the investments are reduced and there
is less inflow which is made (Park and Jang, 2013). The change which is taking place for the
loans in 2018 is lower than in 2017 and that is also included in ascertaining the overall
change. Overall the cash balance is maintained at a level that is suitable for the company and
its operations.
The cash balance of BMW has also risen from $9039 to $10979 which is beneficial for the
business. The cash flows from operating activities have declined and this is because of an
increase in some of the expenses which are incurred in carrying out the operations in the
company. The interest and lease-related payments have changed and they have led to the
change in the final cash flow from operations. There is a decline in the cash flow from
investing activities as the investments are made which reduced the cash balance. There is a
new acquisition that is made and is making the balance negative (Sayari and Mugan, 2013).
The investment which is made in plant and intangibles has been increased and that made the
impact on the cash flows. There is a positive increase in the cash flow from financing
activities and an increase is made from $1572 to $4296 (BMW group, 2018). This is because
of the proceeds which are made from the non-current liabilities and due to that the overall
change is taking place.
Risk analysis
Risks are involved in all the businesses and they incorporate various types of risk. In case of
Daimler the business risk is considered to be satisfactory but the financial risk is minimal.
The major risks were faced due to the prices of the raw material and risk in relation to
management of supplier. The capacities of the business are underutilized and that also acts as
the risk for the company. There is change in the market price and exchange rates and due to
that financial risk is involved and with that interest rate risk is also covered. There is a risk in
relation to the restricted access which is given to the capital markets and that will also be
required to be minimized and for that it is involved in risk management process. To deal with
all the risks there is proper system which is established and is operating.
The analysis is made with the help of ratios and the cash analysis is also performed. The
changes which are taking place have been considered and they show that the company needs

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to make the change in actions by which the growth can be made and the performance of the
business can be improved. The sales growth is also considered and in that also the rise in the
Daimler is very less and that shall be raised to attain the goals and objectives which have
been set by the company. There is the need to make the change by which growth in the
competitive market is made and an additional advantage is received.
Recommendations
The evaluation has been made for all the companies and in that it is identified that Daimler is
performing well in some areas but it is at the lower position in comparison to the other
competitors which have been considered. It is required that the debt shall be reduced and the
balance of equity will be raised by issuing shares. This will make the capital structure to be
appropriate. The increase in sales will be made by which the profits will be increased and
training will be given to staff to maintain the required level of operations. There will be
various offers which will be made available to customers to increase the sales.
Conclusion
The report has been prepared and from that, the complete information in respect of the
performance and position of Daimler is obtained. With that other companies are also
considered for proper comparison and they include Volvo and BMW which are its
competitors. The calculations have been made for the ratio and in that, all the important areas
are evaluated. There is the identification of the profitability, liquidity and leverage which is
managed by the various companies. In further analysis, there is a trend analysis that is
performed for the growth which is involved in respect of sales. The changes have been
identified with their respective impacts. The cash flow position is also analyzed and in that,
all of the changes which have taken place in the companies in the current period in
comparison to the previous period have been ascertained. The overall position is identified
and by that effective comparison is made which will be helping in making further decisions
for the betterment of the company.

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References
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